2004 (5) TMI 507 - AT - Customs

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Misutilization of imported raw materials (Polyol and Toluene Di-Isocynate).
3. Validity of affidavits and evidence submitted by the appellants.
4. Examination of end-use certificates and their authenticity.
5. Allegations of fabrication and manipulation of records.
6. Proper procedure under Notification No. 72/91.
7. Whether the Commissioner went beyond the charges in the show cause notice.

Detailed Analysis:

1. Violation of Principles of Natural Justice:
The appellants argued that the Commissioner violated the principles of natural justice by not considering affidavits submitted by traders who regularly procured PU soles from them. The Commissioner did not verify these affidavits, which lacked complete addresses and specific details. The Tribunal found that the Commissioner correctly discarded these affidavits due to the absence of verifiable information. However, the Tribunal noted that the Commissioner should have taken the appellants' claims on record and verified them through appropriate agencies instead of directing them to submit the information to DRI.

2. Misutilization of Imported Raw Materials:
The appellants were accused of not utilizing imported Polyol and Toluene Di-Isocynate (TDI) for manufacturing polyurethane footwear soles as required under Notification No. 72/91-Cus. Instead, they allegedly manufactured polyurethane foam sheets. The Commissioner presumed that the appellants manufactured PU foam solely out of imported TDI without considering existing stock. The Tribunal found that the Commissioner should have verified the appellants' claims regarding the utilization of TDI and Polyol by considering the opening and closing balances of these raw materials.

3. Validity of Affidavits and Evidence Submitted:
The appellants submitted affidavits from traders to support their claim of manufacturing PU soles. The Commissioner rejected these affidavits due to the lack of addresses and specific details. The Tribunal upheld the Commissioner's rejection of the affidavits but noted that the Commissioner should have verified the appellants' claims through other means before discarding the evidence.

4. Examination of End-Use Certificates:
The appellants produced 25 certificates of utilization of raw materials issued by Shri Mangaiha, Supdt., 7 certificates by Shri Saraschandra, Supdt., and 4 by Chartered Accountants. The Commissioner found that some certificates were issued in connivance with the appellants and others were fabricated. The Tribunal noted that the adjudication order should clearly identify the imports with corresponding bills of entry and utilization certificates and provide reasons for non-acceptance of such certificates.

5. Allegations of Fabrication and Manipulation of Records:
The Commissioner found that the production and sale figures of PU soles were manipulated and inserted into RG-1 registers after the raid. The Tribunal noted that the Commissioner provided reasons for rejecting the figures submitted by the appellants, including discrepancies in the figures and the lack of supporting evidence such as bank statements and sales tax returns.

6. Proper Procedure under Notification No. 72/91:
The appellants argued that no specific procedure was prescribed under Notification No. 72/91 for verifying the utilization of imported raw materials. The Tribunal found that the appellants, being manufacturers of excisable goods, were required to maintain proper central excise records, which should have been sufficient to establish the utilization of imported raw materials.

7. Whether the Commissioner Went Beyond the Charges in the Show Cause Notice:
The appellants claimed that the Commissioner went beyond the charges in the show cause notice. The Tribunal found that the Commissioner discussed figures submitted by the appellants during personal hearings and provided reasons for rejecting them. Therefore, it concluded that the Commissioner did not go beyond the show cause notice and there was no violation of principles of natural justice in this regard.

Conclusion:
The Tribunal found that there was a violation of principles of natural justice as the Commissioner improperly directed the appellants to submit information to DRI instead of verifying it himself. The order of the Commissioner was set aside, and the case was remanded for re-adjudication within six months, providing the appellants a proper opportunity to present their case and ensuring proper findings on all allegations made in the show cause notice in accordance with the law. The appeals were allowed by way of remand.